Pizza Hut 2004 Annual Report Download - page 60

The฀following฀table฀summarizes฀the฀2004฀and฀2003฀activity฀
related฀to฀reserves฀for฀remaining฀lease฀obligations฀for฀stores฀
closed฀or฀stores฀we฀intend฀to฀close.
฀ ฀ ฀ ฀ Estimate/฀
฀ Beginning฀฀ Amounts฀ New฀ Decision฀ ฀ Ending฀
฀ Balance฀ Used฀ Decisions฀ Changes฀ Other)(a)฀ Balance
2003฀Activity฀ $฀41฀ (13)฀ 6฀ 2฀ 4฀ $฀40
2004฀Activity฀ $฀40฀ (17)฀ 8฀ (1)฀ 13฀ $฀43
(a)฀Primarily฀reserves฀established฀upon฀acquisitions฀of฀franchisee฀restaurants.
The฀following฀table฀summarizes฀the฀carrying฀values฀of฀the฀
major฀classes฀of฀assets฀held฀for฀sale฀at฀December฀25,฀2004฀
and฀December฀27,฀2003.฀U.S.฀amounts฀primarily฀represent฀
land฀on฀which฀we฀previously฀operated฀restaurants฀and฀are฀net฀
of฀impairment฀charges฀of฀$2฀million฀at฀both฀December฀25,฀
2004฀ and฀ December฀27,฀ 2003.฀ International฀ amounts฀ in฀
2003฀relate฀primarily฀to฀our฀Puerto฀Rico฀business.฀The฀Puerto฀
Rico฀business฀was฀sold฀on฀October฀4,฀2004฀for฀an฀amount฀
approximating฀its฀then฀carrying฀value.
฀2004
฀ ฀ Inter-฀
฀ U.S.฀ national฀ Worldwide
Property,฀plant฀and฀equipment,฀net฀ $฀ 7฀ $฀ —฀ $฀ 7
Goodwill฀ ฀ —฀ ฀ —฀ ฀ —
Other฀assets฀ ฀ —฀ ฀ —฀ ฀ —
฀Assets฀classified฀as฀held฀for฀sale฀ $฀ 7฀ $฀ —฀ $฀ 7
฀ 2003
฀ ฀ Inter-฀
฀ U.S.฀ national฀ Worldwide
Property,฀plant฀and฀equipment,฀net฀ $฀ 9฀ $฀ 73฀ $฀82
Goodwill฀ ฀ —฀ ฀ 12฀ ฀12
Other฀assets฀ ฀ —฀ ฀ 2฀ ฀ 2
฀Assets฀classified฀as฀held฀for฀sale฀ $฀ 9฀ $฀ 87฀ $฀96
Wrench฀Litigation฀ Income฀of฀$14฀million฀was฀recorded฀for฀
2004฀reflecting฀settlements฀associated฀with฀the฀Wrench฀liti-
gation฀for฀amounts฀less฀than฀previously฀accrued฀as฀well฀as฀
related฀insurance฀ recoveries.฀ Expense฀of฀ $42฀million฀ was฀
recorded฀as฀Wrench฀litigation฀for฀2003฀reflecting฀the฀amounts฀
awarded฀to฀the฀plaintiff฀and฀interest฀thereon.฀See฀Note฀24฀for฀
a฀discussion฀of฀Wrench฀litigation.
AmeriServe฀and฀Other฀Charges฀(Credits)฀ AmeriServe฀Food฀
Distribution฀Inc.฀(“AmeriServe”)฀was฀the฀primary฀distributor฀of฀
food฀and฀paper฀supplies฀to฀our฀U.S.฀stores฀when฀it฀filed฀for฀
protection฀under฀Chapter฀11฀of฀the฀U.S.฀Bankruptcy฀Code฀on฀
January฀31,฀2000.฀A฀plan฀of฀reorganization฀for฀AmeriServe฀(the฀
“POR”)฀was฀approved฀on฀November฀28,฀2000,฀which฀resulted฀in,฀
among฀other฀things,฀the฀assumption฀of฀our฀distribution฀agree-
ment,฀subject฀to฀certain฀amendments,฀by฀McLane฀Company,฀
Inc.฀During฀the฀AmeriServe฀bankruptcy฀reorganization฀process,฀
we฀took฀a฀number฀of฀actions฀to฀ensure฀continued฀supply฀to฀our฀
system.฀Those฀actions฀resulted฀in฀significant฀expense฀for฀the฀
Company,฀primarily฀recorded฀in฀2000.฀Under฀the฀POR,฀we฀are฀
entitled฀to฀proceeds฀from฀certain฀residual฀assets,฀preference฀
claims฀and฀other฀legal฀recoveries฀of฀the฀estate.
We฀ classify฀ expenses฀ and฀ recoveries฀ related฀ to฀
AmeriServe,฀as฀well฀as฀integration฀costs฀related฀to฀our฀acqui-
sition฀of฀YGR,฀costs฀to฀defend฀certain฀wage฀and฀hour฀litigation฀
and฀certain฀other฀items,฀as฀AmeriServe฀and฀other฀charges฀
(credits).฀These฀amounts฀were฀classified฀as฀unusual฀items฀
in฀2002.
Income฀ of฀ $16฀million฀ and฀ $26฀million฀ was฀ recorded฀
as฀ AmeriServe฀ and฀ other฀ charges฀ (credits)฀ for฀ 2004฀ and฀
2003,฀respectively.฀These฀amounts฀primarily฀resulted฀from฀
cash฀recoveries฀related฀to฀the฀AmeriServe฀bankruptcy฀reor-
ganization฀process.฀Income฀of฀$27฀million฀was฀recorded฀as฀
AmeriServe฀and฀other฀charges฀(credits)฀for฀2002,฀primarily฀
resulting฀from฀ recoveries฀ related฀ to฀the฀AmeriServe฀ bank-
ruptcy฀reorganization฀process,฀partially฀offset฀by฀integration฀
costs฀related฀to฀our฀acquisition฀of฀YGR฀and฀costs฀to฀defend฀
certain฀wage฀and฀hour฀litigation.
SUPPLEMENTAL฀CASH฀FLOW฀DATA฀
NOTE฀8
฀2004฀ 2003฀ 2002
Cash฀Paid฀for:
฀ Interest฀ $฀146฀ $฀178฀ $฀153
฀ Income฀taxes฀ ฀276฀ ฀196฀ ฀200
Significant฀Non-Cash฀Investing฀and฀฀
฀ Financing฀Activities:
Assumption฀of฀debt฀and฀capital฀leases฀฀
฀ related฀to฀the฀acquisition฀of฀YGR฀ $฀ —฀ $฀ —฀ $฀227
Assumption฀of฀capital฀leases฀related฀฀
฀ to฀the฀acquisition฀of฀restaurants฀฀
฀ from฀franchisees฀ ฀ 8฀ ฀ —฀ ฀ —
Capital฀lease฀obligations฀incurred฀to฀฀
฀ acquire฀assets฀ ฀ 13฀ ฀ 9฀ ฀ 23
Debt฀reduction฀due฀to฀amendment฀฀
฀ of฀sale-leaseback฀agreements฀฀
฀ (see฀Note฀14)฀ ฀ —฀ ฀ 88฀ ฀ —
On฀November฀10,฀2003,฀our฀unconsolidated฀affiliate฀in฀Canada฀
was฀ dissolved.฀ Upon฀ dissolution,฀ the฀ Company฀ assumed฀
operation฀of฀certain฀units฀that฀were฀previously฀operated฀by฀the฀
unconsolidated฀affiliate.฀The฀Company฀also฀assumed฀owner-
ship฀of฀the฀assets฀related฀to฀the฀units฀that฀it฀now฀operates,฀
as฀well฀as฀the฀real฀estate฀associated฀with฀certain฀units฀previ-
ously฀owned฀and฀operated฀by฀the฀unconsolidated฀affiliate฀that฀
are฀now฀operated฀by฀franchisees฀(either฀our฀former฀partner฀in฀
the฀unconsolidated฀affiliate฀or฀a฀publicly-held฀Income฀Trust฀in฀
Canada).฀The฀acquired฀real฀estate฀associated฀with฀the฀units฀
that฀are฀not฀operated฀by฀the฀Company฀is฀being฀leased฀to฀the฀
franchisees.฀The฀resulting฀reduction฀in฀our฀investments฀in฀uncon-
solidated฀affiliates฀($56฀million฀at฀November฀10,฀2003)฀was฀
primarily฀offset฀by฀increases฀in฀property,฀plant฀and฀equipment,฀
net฀and฀capital฀lease฀receivables฀(included฀in฀other฀assets).฀
The฀Company฀realized฀an฀insignificant฀gain฀upon฀the฀dissolu-
tion฀of฀the฀unconsolidated฀affiliate.฀This฀gain฀was฀realized฀as฀
the฀fair฀value฀of฀our฀increased฀ownership฀in฀the฀assets฀received฀
was฀greater฀than฀our฀carrying฀value฀in฀those฀assets,฀and฀was฀
net฀of฀expenses฀associated฀with฀the฀dissolution.
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